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The IRS audited the tax returns of Darryl Strawberry, a former…

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The IRS audited the tax...

The IRS audited the tax returns of Darryl Strawberry, a former major league outfielder. Itcontended that, between 1986 and 1990, Strawberry earned $422,250 for autographsignings, appearances, and product endorsements, but he reported only $59,685 ofincome. Strawberry attributed the shortfall to his receipt of cash for autograph sessionsand promotional events. He allegedly concealed the cash payments in separate bankaccounts of which his CPA was unaware. What tax compliance issues regarding thealleged underreporting are pertinent?

Thanks for your question.This is classic case of celebrity under reporting here.Many have been investigated as relates to autograph signing and memorabilia related income.In this case even his accoutant was unawware of the diversion of case and non reporting here.The IRS looks specifically for cases here like this to prosecute and make public examples.The guilty party here must deal with criminal penalties , restitution, and fines.

The IRS audited the tax returns of Darryl Strawberry, a former major league outfielder. It contended that, between 1986 and 1990, Strawberry earned $422,250 for autograph signings, appearances, and product endorsements, but he reported only $59,685 of income. Strawberry attributed the shortfall to his receipt of cash for autograph sessions and promotional events. He allegedly concealed the cash payments in separate bank accounts of which his CPA was unaware. What tax compliance issues regarding the alleged underreporting are pertinent?

Morris Jory, a long-time tax client of the firm you work for, has made substantial gifts during his lifetime. Mr. Jory transferred Jory Corporation stock to 14 donees in December 2005. Each donee received shares valued at $11,000. Two of the donees were Mr. Jory's adult children, Amanda and Peter. The remaining 12 donees were employees of Jory Corporation who are not related to Mr. Jory. Mr. Jory, a widower, advised the employees that within two weeks of receiving the stock certificates they must endorse such certificates over to Amanda and Peter. Six of the donees were instructed to endorse their certificates to Amanda and six to Peter. During 2005, Mr. Jory also gave $35,000 cash to his favorite grandchild, Robin. Your firm has been engaged to prepare Mr. Jory's 2005 gift

tax return. In January 2006, you meet with Mr. Jory, who insists that his 2005 taxable gifts will be only $24,000 ($35,000 to Robin _ $11,000 annual exclusion). After your meeting with Mr. Jory, you are uncertain about his position regarding the amount of his 2005 gifts and have scheduled a meeting with your firm's senior tax partner, who has advised Mr. Jory for more than 20 years. In preparation for the meeting, prepare a summary

of the tax and ethical considerations (with supporting authority where possible) regarding whether you should prepare a gift tax return that reports the taxable gifts in accordance with Mr. Jory's wishes.

Morris Jory, a long-time tax client of the firm you work for, has made substantial gifts during his lifetime. Mr. Jory transferred Jory Corporation stock to 14 donees in December 2005. Each donee received shares valued at $11,000. Two of the donees were Mr. Jory's adult children, Amanda and Peter. The remaining 12 donees were employees of Jory Corporation who are not related to Mr. Jory. Mr. Jory, a widower, advised the employees that within two weeks of receiving the stock certificates they must endorse such certificates over to Amanda and Peter. Six of the donees were instructed to endorse their certificates to Amanda and six to Peter. During 2005, Mr. Jory also gave $35,000 cash to his favorite grandchild, Robin. Your firm has been engaged to prepare Mr. Jory's 2005 gift

tax return. In January 2006, you meet with Mr. Jory, who insists that his 2005 taxable gifts will be only $24,000 ($35,000 to Robin _ $11,000 annual exclusion). After your meeting with Mr. Jory, you are uncertain about his position regarding the amount of his 2005 gifts and have scheduled a meeting with your firm's senior tax partner, who has advised Mr. Jory for more than 20 years. In preparation for the meeting, prepare a summary of the tax and ethical considerations (with supporting authority where possible) regarding whether you should prepare a gift tax return that reports the taxable gifts in accordance with Mr. Jory's wishes.

This is certainly filled with potential liability for all of the parties involved.Each of them individually should be counseled to seek independent advice of their choosing.

The big problem here is that Mr. Jory is our client here and we would look to preparing his taxes in this matter.Mr.Jory should be advised on his individual liabilities here

The firms should decline the others involved as their interests may compete with his and should be completed by others.We would want to advise Hal that we will prepare his return and what his liabilities are.These gifts may well require the folsk that received them to pay taxes on such gifts.His protection and proper completion of his return is our main priority.

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The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).